Panel Begins Overhaul Of Virginia Tax Code

Lawmakers Aim To Take Suggestions To Ga By 2003

July 02, 2001|By HUGH LESSIG Daily Press

RICHMOND — For years, tax reform has been the political equivalent of a root canal.

Various commissions have poked at it, frowned knowingly and said yes, this must get attention or the pain will get worse. Some in the General Assembly agreed, but as a group they cringed at the unpleasantness of it all.

Now you can almost hear the whine of a drill.

Last week, a select group of lawmakers began an overhaul of the state tax code. Their goal is to make recommendations to the General Assembly by 2003. The 14 members, all of whom have an interest in finance law or the vagaries of the tax code, include a senator who once worked as an Internal Revenue Service agent -- Kevin G. Miller of Harrisonburg -- and the lawmaker who first proposed cutting the car tax, Sen. Charles J. Colgan of Prince William.

The lawmakers said they'll take their time and slowly build consensus, likening their effort to the start of other landmark reforms, such as the abolition of parole and juvenile justice changes.

Three days after the lawmakers began their work, Gov. Jim Gilmore joined the fray. He announced the formation of a bigger, faster commission -- a 30-member group that will finish its job by December. Chaired by former congressman Tom Bliley, it will focus less on details of the code and look at broader questions of how Virginia taxes its citizens.

Tax wonks across Virginia finally have reason to party. What took the General Assembly several years to face now has the attention of both a legislative and an executive commission. There are common themes to both. The question is, will one duplicate the other?

Supporters of tax reform generally agree on the reasons for an overhaul. Virginia's tax system has not kept up with the transformation of the economy. Once heavily based on manufacturing, Virginia's economy now looks to technology, tourism and service-oriented businesses. Also, there is a fundamental disagreement between state and local governments about who should pay for costly social services, jails and health programs.

Both groups are aiming high. Gilmore said his commission will examine the state constitution. Del. Robert F. McDonnell, the Virginia Beach Republican who co-chairs the legislative panel, said flatly: "Everything is on the table."

What's everything? Both sides have said they'll draw on the work of a previous group, a citizens' commission on tax reform that presented its report to the General Assembly in December.

The group recommended expanding the sales tax to include services, such as a haircut. It said Virginia should broaden the first two brackets of the state income tax -- they haven't changed since 1926 and together encompass the first $5,000 of a person's income. It recommended the state share part of the income tax with local governments, since the income tax is a growing source of money.

The legislative panel also discussed taking a hard look at people who get tax breaks. The same goes for some nonprofit groups that have tax- exempt status. Taxing sales over the Internet? They'll talk about it.

But not everything on the table would require paying more taxes. One proposed change in the income tax would allow taxpayers to increase their standard deductions and personal exemptions, a move that would especially help the poor. Local governments could get help if lawmakers decide the state should pay more for costly social services.

Sen. Bill Bolling, R-Hanover, is a member of the legislative panel and this week was named to Gilmore's group. He is not concerned that the two groups will be working at cross-purposes.

He suspects that Gilmore's commission will focus more on broader issues and the legislative group will get into more detail.

"I don't see any inconsistency between the two," he said

Del. William J. Howell, R-Stafford, sits on the legislative panel. He has a special interest in seeing that Virginia justifies the various tax breaks it gives to people and groups. In fact, he serves on a subcommittee that is looking into that very subject.

A legislative commission, plus an executive commission plus a subcommittee?

"Two heads are better than one," Howell said, "and I guess three heads are better still."

John Broadway is Gilmore's liaison to the Senate, and he'll be the executive director of the Gilmore commission. He sees the group as a catalyst for change. It will include lawmakers, academics, private citizens and local government officials, and that will give it a slightly different focus.

"We realize we can't remake the whole world of government in six months," he said.

Whatever happens, tax reform may finally reach critical mass.

"Some issues in the General Assembly we have studied to death," Bolling said, "and the composition and structure of the tax code is one. The last thing we need to do is complete another study and have it sit on the shelf."

Lawmakers who have toiled privately for tax reform agree. Del. Phillip A. Hamilton, R-Newport News, has authored legislation to reform the state income tax, but it never got out of committee. He wants to see some measure reach the House floor for an up-or-down vote.

If commission after commission does nothing, he said, "We're going to start to lose a whole lot of credibility."

Hugh Lessig can be reached at (804) 225-7345 or by e-mail at hlessig@dailypress.com